“The End of Obesity” and the FDA Announcement expected on June 17

Checking out the inaugural teaser from Agora Financial's FDA Trader

That’s what’s being touted by the new letter that as far as I can tell was just launched moments ago by Agora, which they’re calling FDA Trader and for which they apparently hired away Paul Mampilly from the Palm Beach Letter (OK, they didn’t really “hire him away” — Palm Beach is also an Agora affiliate, and the folks heading these letters move around all the time both between and within publishing houses).

So we have now yet another letter that tracks FDA decisions — a growing area of newsletter popularity after a year or two of huge performance for biotech stocks, and the ideal kind of non-correlated sector where the economy doesn’t matter so much… it’s all about picking the right investigational drug or the right company at the right price. Most of these letters, as with the “Most Profitable Calendar Known to Man” pitch from the new BioScience Millionaire service from Money Map Press, aim to track upcoming FDA decisions and similar catalyst points and recommend trades based on those decisions.

Whether or not any of these letters can put together good long-term results is certainly an open question — I’ve seen several such letters die in the years we’ve been tracking teasers at Stock Gumshoe, and it is tough to get an edge in biotech, particularly if you’re trying to trade off of FDA decisions in a short-term kind of way (lots of other people know when those anticipated FDA dates are, too, and lots of other people are doing the same calculus to determine what the new drug, if approved, should be worth… so when the approval comes, you end up with thousands of investors waiting for a pop, sometimes not realizing that with that many people waiting for the pop, well a drop as they all sell and move on to something else is just as likely).

So to make big winning short-term trades you often have to be either contrarian or lucky, though certainly if you follow the science and management well you might make money in the long term (that’s beyond my ken for the most part, which is why I’m delighted to have Dr. KSS and his band of merry followers tracking interesting biotech ideas).

Will Paul Mampilly make some good moves in this arena?

Well, I guess we’re about to find out.

His first teaser pitch for this new service touts an announcement from the FDA, apparently expected in about two weeks (June 17 is trotted out as a hot deadline), and it’s all about ending obesity… probably the most important affliction in the health care marketplace beyond Alzheimer’s. That’s “most important” not necessarily in terms of actual health, though obesity is certainly tied to bad health in many ways, but in terms of money — there is a huge avalanche of cash to be had for truly effective obesity or Alzheimer’s drugs or treatments, largely because such treatments have proven so elusive.

That hunger for an obesity “cure” has led to several stock spikes in years past — most recently we had the pitches for Arena’s (ARNA) Belviq in both 2010 and 2012… it turned out that the 2010 FDA calendar date was a head fake, with disappointing news, but the stock did eventually take off on approval and decent acceptance a couple years later, and ARNA is now a billion-dollar company. Still far short of the world-changing results hoped for financially, partly because of the limits of Belviq (it does not, unfortunately, make you skinny after a six week regimen of two pills a day… it just makes a bit more weight come off, and stay off, than without drugs. You still have to diet and exercise. Not quite magical enough to make it a $10 billion company just yet).

So that’s the backdrop: investors love anti-obesity stuff. And the potential market is obviously huge, at least theoretically, as we sit here now knowing what the drug or device is.

So now… what’s the tease?

“… grab a pen, get a piece a paper and write down the following date: June 17, 2014.

“Why?

“Because something very special could happen on this date. Something that might change how you invest forever.

“In short, we are expecting the Food and Drug Administration to make a very special announcement…

“Now, I don’t know what you have planned already on this day. But here’s my advice…

This is what we call “building up expectations.” Now we’re pretty much guaranteed to be disappointed by whatever happens two weeks from today.

Here’s some more of the ad:

“… on this exact date, we believe the FDA will publicly announce (for the first time ever) a first-of-its-kind solution that could be the “end of obesity” in the United States.

“In other words, one of the biggest health problems facing us could be solved — once and for all…

“If we’re right — and I have every reason to believe we are — we could see the price of one tiny stock go up 400% or more.

“I know it sounds fantastic. Because this could be wonderful news for your health — as well as for the health of your friends and family members.”

Every single biotech stock pitch worth its salt has some kind of line like that — right away, you can imagine not only being awash with riches but also (since you’re not just a greedy little troll) helping to make people healthy! One can almost picture the medal being affixed to one’s chest.

OK, so we know that obesity is obviously endemic in the United States, we know that “curing” obesity would obviously be good and would likely make someone quite wealthy. What, then, is the solution that has some kind of FDA date coming up on June 17? A few more clues:

“… there could be more than 1.4 billion adults alive on the planet right now whose lives are at risk — and could benefit from remarkable new treatment developed by this tiny penny stock…

“And that’s why I wanted to get you this message as soon as possible.

“Because a tiny public company based in St. Paul, Minn., has already discovered a solution to this terrible problem…

“No, this company is not selling supplements or exercise equipment.

“They are not even developing a drug…

“Instead, they have invented a tiny medical device that can ‘turn off hunger’ in your brain.”

Ah.

That means we’ve probably got enough clues already. But just in case, let’s check and see if the Agora folks have any other tidbits to throw our way….

“The Tiny Device That Cuts the ‘I’m Hungry’ Signal

“For the first time ever, there could be an anti-obesity device on the market that uses electricity to suppress hunger by blocking the nerve signals between the brain and stomach.

“In short, this device controls how the stomach expands when we start to eat. It uses an electrical stimulator to block signals from the vagus nerve, the nerve that connects the brain to the gastrointestinal organs, regulating hormones and other factors.

“As Kiplinger’s magazine reported in a write-up about this company, ‘cuts the ‘I’m hungry’ signal before it transmits from stomach to brain.’

“And Popular Science put it this way: ‘[This device] blocks vagus nerve signals by zapping the nerve with electric pulses. Patients… have shed up to 30% of their body weight’….

“The ‘obesity blocker’ is the size of a small watch, and is implanted in the left chest area through a procedure that takes a couple hours. You go home the same day after the procedure is complete.”

OK, fine, we can let the Thinkolator loose on this one: This is EnteroMedics (ETRM).

EnteroMedics is a small company, market cap around $130 million, and they have really just one product: the Maestro implant, which is described as somewhat like a pacemaker that stimulates the vagal nerve in some particular way (called VBLOC therapy) and therefore curbs the appetite. The company has been on a long, long road developing this therapy, and the Maestro has been granted a CE mark in Europe (analagous to FDA approval) and a similar status in Australia, which in many cases means approval in the US is more likely — particularly for medical devices, where the bar has often been seen as lower than it is for pharmaceuticals (that’s not necessarily true for all devices, of course).

And yes, there is something happening on June 17 — that’s the date of the FDA Advisory Panel meeting for Maestro VBLOC therapy. Such meetings are followed closely because the report of the panel always carries a lot of weight with the FDA, though a positive advisory panel meeting does not guarantee approval (nor does a negative one guarantee rejection). So you won’t find the Maestro advertised by your local hospital on June 18.

That’s about all I know about Enteromedics — I’m writing this in the late night hours because I have commitments with my children tomorrow, but I dropped Dr. KSS a line to see if he’s got any thoughts he wants to share on the company (we’ve got another piece from the Dr. coming out probably late today, so he might well be busy). Don’t know if he likes it or not, but it’s in his wheelhouse so I presume he’s heard it touted many times in the five+ years (and $200 million, roughly) they’ve spent trying to get US approval.

Yes, five years. Not that they’ve been under the FDA’s microscope that entire time, I don’t know what the path has been like for them in any detail, but the original Maestro device was approved for use in Europe more than five years ago. The second generation of the device was approved about three years ago in Australia and in Europe. Which would seem to be encouraging, and it looks like they still have major studies going on to measure the efficacy of the device that perhaps are leading folks to be patient in jumping onboard to use it… but from my quick scan of their numbers they have seemingly generated no revenue since they first got the CE Mark in 2009. They do have commercialization partners in Australia and in some Gulf countries, but as of the 2013 annual report no real sales and no commercialization progress in Europe. Where there is plenty of obesity, though not to the scale we’ve perfected in the United States. Which indicates that they’re not spending money or much effort to commercialize VBLOC Maestro in any other country, perhaps recognizing that the mother lode market is the USA.

And yes, they’ve said that if the device is approved in the US, they can move to commercialize it by late in 2014.

At that, I’ll leave you to it. Wiser minds than mine can discuss whether the implant is a worthwhile idea, whether it might ever make money, what the clinical trial data might mean for potential approval and market size, and what might happen to the stock price if and when the FDA says nice things about it on June 17 (or if it approves the device some time later_. All I can tell you is that yes, it looks like Paul Mampilly’s FDA Trader is trying to make a name for itself out of the gate on the back of ETRM and its FDA Advisory Panel meeting in two weeks.

So Whaddya think?

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There’s just not sound science behind this company’s vagus nerve modulation ideas. In this case, pills really work better, and are safer than surgery. I don’t know of anyone in GI that thinks this method has any chance of success. I am amazed this company is still at it, still fetching capital to stay going.

That’s not really answerable to any degree of certainty. Stocks go down after positive news all the time, including biotech stocks awaiting FDA approval or advisory panel meetings. If they do get a positively glowing panel recommendation there’s probably a good chance that the stock would rise; if they get hammered by the committee it will probably fall. Probably, not definitely, and the committee doesn’t have to have a strong unified opinion one way or another. If approval seems very likely after June 17, the valuation will start to be based on what their actual commercial potential might be —… Read more »

“it does not, unfortunately, make you skinny after a six week regimen of two pills a day… it just makes a bit more weight come off, and stay off, than without drugs. You still have to diet and exercise.”

Just wonder if diet and exercise alone, without those pills, might also work?
Or am I thinking the impossible, because I am anything but obese.

Belviq, the pill from ARNA, is an appetite suppressant. It helps you stay on a diet by killing cravings for carbs and sugar. If diet and exercise alone worked, 70% of Americans would not be overweight or obese.

A minor clarification is in order – when discussing diet, “carbs” need to be divided into simple and complex carbs. Starches and sugars (simple carbs) are easily converted into human fat by the body and are largely responsible for the American obesity epidemic. Fats themselves take a tortuously complicated metabolic route to being stored in the body as human fat. The food industry, misguided decades back by govt. nutritional guidelines, lowered fat in processed foods and errantly stamped it “heart-healthy”. To keep sales up, they added sugar instead, leading to the USA of predominantly obese citizens we see today. Katie… Read more »

losing weight is very easy! you do have to KNOW about your metabolism type. Even if you do not, here is the 0 $ path: – go 0 sugar just drop that stuff – cut out starchy food: pasta, noodles, rice, potato -cut out high fat dairy & all canned stuff. Go fermented low fat dairy. – breakfast: eggs with spinach; lunch: veggies/beans/lean protein -diner–>> vary from lunch but essentially beans/veggies/lean protein. Once a week you can binge on sweets/starchy food. From Nov 2013 to now, I am down 30 lbs! To lose the last 10-12 , I need to… Read more »

Anecdotal information:
PAXIL was helpful in my weight loss of 35 lbs. In my case it killsed cravings.
My diabetes is now being helped by VICTOZA and I am now beginning to see further weight loss. Stand by.

Carbon: a great anecdote, even if lamentably not generalizable. Depression is sometimes thought to lead to carbohydrate cravings on the basis of the serotonin-deficiency model of depression. Glucose causes insulin release, but insulin action mediates uptake of things in addition to glucose, including that of tryptophan into the brain. Tryptophan is a precursor to serotonin. So, eat a donut, release some insulin, cause a brain serotonin surge, feel better. This model has never been fully validated, of course, but seems to pertain for specific patients. As a class, the SSRI’s tend to be appetite-neutral in their actions in most people,… Read more »

The Fair Value of the company is a minus $6/share. The chart pattern looks like a maybe bullish for the short term. If the price would hit $2.50/share chart pattern would look better but the fundamentals worse. Now if my broker makes a gift of 6K I might consider it. Worth buying a Put? maybe

Solyom: agree totally. The ad com meeting is about this: http://ir.enteromedics.com/releasedetail.cfm?ReleaseID=810950 The key thing is: it takes general anesthesia and laparoscopy to place it! If you are going to have that, get a lap band! As I see it, the ad com must weigh all the data, not just the study in the link. And some of the other data is bad, casting doubt on the veracity and general applicability of this one study. I have really sat down and studied this company enough to offer a formal opinion of likelihood of approval, but if I were on the committee… Read more »

Science (in the form off independently funded randomised controlled trials with statistically significant results) tells us that the correct food intact will control obesity and related chronic disease (diabetes type 2, cardiovascular disease, some cancers, and even altzhimmers for those who are Insulin Resistent). Science tells us that a high fat diet does not cause cardiovascular disease. Science tells us that high carbohydrate diet does. No pills no surgery. Read Gary Taubes “What makes us fat”. Read the Swedish health review of 16000 odd science research on this subject.

My daughter had to go on a gluten free diet and to support her I also went on one. Lost 10 lbs without thinking about it and on my way to another 10 as I am feeling better and starting to exercise as well. I read Dr. Williams Davis’s book “Wheat Belly” as I started into Gluten free and pretty interesting overall. Food for thought. Pun intended.

Yeah, I understand where you are coming from. We limit wheat, corn and soy as much as we can too. Even whole grain wheat. Kidney- and gall- stones run in the family so we have to look out for oxalates as well as keep things low fat. Then we had kids with multiple food allergies, and that was a whole new life for us. Fortunately they like most vegetables, so we are doing a pseudo-Paleo. In the 90’s it was all about low-fat-high-carb, so our cooking skills were more geared towards bread/pasta. I got a one-week supply of meals from… Read more »

If this implant can turn off hunger signals from the brain, I wonder what other signals it could be programed to turn off, or on. Are there “improved” models on the drawing board? I hear model #666 could be killer! Or maybe not.

Carl, Maybe, in time, the device could be made to operate in the same way as recharging of various devices such as cell phones , laptops etc. is being envisaged : signals sent through the atmosphere. I wonder………It would certainly be better than GA and Laparoscopy….and I’d be first in line!!!

I really like Gary Taubes books. If we really want to talk about obesity, then these books are a must.

Good Calories bad calories is maybe too technical and not easy to read (I did twice but I really enjoy reading this kind of stuff). On the other hand, the “easy version” which is “WHY WE GET FAT, and what to do about it” is an amazing book. Easy to read, whith lots of great information.

For those of you who said eat less and exercise more, you are lazy thinkers. If you investigated the food you are eating you would find that the industry is pumping as much sugar, salt, and carbon dioxide into our foods and drinks as possible. They are making us sick! If you drink carbonated, sugar flavored beverages, you are drinking “liquid candy,” and you want more, plus the carbonation is putting carbon dioxide into a system that needs oxygen, but puts out carbon dioxide. See the problem. Food based on advertising, that’s based on getting as much money as possible,… Read more »

I’m from corn country, and I remember in the 1970’s there were experiments going on to splice scorpion DNA into corn DNA, to make it drought-resistant. I understand the logic, but when you eat your corn, do you want to eat corn, or scorpion corn? Or does it matter? People eat scorpions too. But do you at least want to know if you are eating scorpion corn?

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The ETRM device, if successful, could really help obese individuals shed some excess weight! The jury is still out and the fate of the ETRM stock will be unknown until next week!
Gee I wonder if the good Dr. KSS has a heavy SHORT position in ETRM?

A Yahoo Poster comments on the fate of ETRM , and it does sound plausible . On Monday 6/23/13 , we shall see what happens. “MATERIAL NEWS MONDAY??? I am of the opinion that ETRM has bullish 24 month data in its hands showing a 17% gap between VBLOC and sham device, a huge increase compared to 8.5% at 12 months. Zeeman was able to get his hands on this slide from the FDA Panel Live feed. The question is “why is this news not released?”. It is MATERIAL. We have some insider buying and a 211K share order BUY… Read more »

A Yahoo Poster comments on ETRM’S Maestro VBLOCK weight reduction device. ” Spoke with a Gastrologist Surgeon at Newton Wellesley Hospital about VBLOCK, and HE LOVES IT. Brought my mom in for an endoscopy and spoke with the lead surgeon. He told me the device is the equivalent of a cochlear implant, yet is easier to implant (minimum invasive), can be done within 120 minutes (including anesthesia) and patient is released later that day and or the next day if he//she has any thrombotic response issues. He already has recommended it’s use to the hospital directors panel as soon as… Read more »

Wow, a comment from an anonymous Yahoo poster who ‘spoke with a Gastrologist Surgeon,’ who needs more data than that! And this anonymous, not-at-all-made-up person was ‘Loading up big time on Monday’ which is of course what all smart investors do when they get tips from unknown people on the internet. Yet funnily enough, ETRM has lost half its value since mid-June. Rick, you are not half as slick as you think you are.

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